Socially Optimal Pollution Levels

Each fall, I start my undergraduate environmental economics class by asking students "What is the socially optimal level of pollution?"  The class consists of about 1/2 economics majors and 1/2 natural resource/ecology/treehugging (a joke!) majors.  Inevitably I get a critical mass of students that think zero pollution is optimal.  I tell them "If you learn one thing in this class, learn that zero pollution is not an option."  Well, I gave the final exam in that class yesterday and asked "What is the socially optimal level of pollution? Explain."  Below are a representative sample of answers.  Was I a successful teacher this quarter?  You be the judge.

Some answers from econ majors:

• We need some kind of pollution.
• The optimal level of pollution is the maximum amount we can pollute but still maintain a sustainable environment.
• We have to pollute to live.  So we just make sure our marginal costs do not exceed our marginal benefits.
• Pollution is positive for society as a whole.

Some answers Captain Planet would like.

• If economic considerations were not taken into account, the socially optimal level of pollution would be zero.  This is because no pollution would represent no cost to society. 
• The best level of pollution is the level that existed before industry raised it.  The environment naturally pollutes the level it needs to exist.

Some answers from students paying close attention is class:

• I still like 0, but it's not practical, feasible, efficient or effective.
• No matter who receives the benefits or cost, society benefits most when the marginal benefit of pollution equals the marginal cost.

And finally, here's an answer that received full credit:

• From an economic persepctive the socially optimal level of pollution occurs when the marginal benefit of the last unit of pollution exactly equals the marginal cost of pollution.  At this level the net benefits to society are maximized.  If all of the externalities of pollution are accounted for, the resulting level of pollution will be optimal.

About 50% of the class wrote something close to that.  About 75% of the class at least said marginal benefits equal marginal cost, although in the interest of full disclosure I did tell them last week that if you are clueless on an answer, MB=MC is always a good guess. 

I'm so proud.  The brainwashing is working--cue the evil professor laugh.